Introduction
Within neoliberal discourse, corruption, understood as the ‘misuse of public power for private or political gain’, has been identified as a major obstacle to development in that it reduces domestic investment, discourages foreign direct investment (FDI), inflates government expenditures and distorts public spending by shifting resources from education, health and infrastructural investment into sectors more malleable to corruption, such as the security sector.
In its 2006 Development White Paper, DFID committed itself to scrutinising public spending and procurement in the defence sector in developing countries as part of its broader anti-corruption campaign and as an extension of its work on security sector reform. The goal was to improve transparency and accountability in military budgeting and arms procurement in developing countries. In November 2007, DFID tentatively launched its Transparency in Defence Expenditures (TIDE) initiative. The stimulus for this initiative was inspired by a paper produced by the IMF economists Gupta et al. (2000), who hypothesised that corruption is highly correlated with (1) high shares of military expenditure in both GDP and overall government expenditure; and (2) high levels of military procurement spending in relation to both GDP and total government spending. Without evaluating the suitability of their methodology to the context of sub-Saharan Africa (SSA), DFID officials commissioned a series of consultancy papers from defence economic ‘experts’ to explore the extent of corruption in military expenditures and arms procurement in sub-Saharan Africa, using the quantitative methodologies favoured by Gupta et al. (2000).
This article attempts to show that DFID's neoliberal assumptions about the nature of corruption in arms procurement are highly biased, and that studies based on neoliberal methodologies produce a prejudicial picture of the nature of corruption in military procurement in SSA. In much of the development literature, corruption in the security sector has been treated as though it was exclusive to emerging market economies and poorer developing economies. However, there is a growing body of evidence which suggests that misgovernance and corruption in the security sector are more widespread (Kaufman 2004) than the neoliberal institutions have been willing to acknowledge. Multinational companies, including British-based companies operating outside the OECD region, have been implicated in providing lucrative bribes to government officials in developing countries, in gross violation of the OECD Anti-Bribery Convention. A number of high-profile arms procurement corruption cases in SSA highlight the role that multinational companies have played in arms corruption on the continent, strongly suggesting that corruption in arms procurement is far more complex and more common than DFID is willing to acknowledge.
Furthermore, for corruption in arms procurement to thrive, there have to be financial institutions willing to launder the ill-gotten gains of graft. This implies that a web of transnational corruption exists that links transnational arms companies to corrupt foreign officials and global financial institutions. Given this global pipeline of corruption, a focus that seeks solely to demonise political and military elites in the developing countries can only provide a very partial picture of what is actually going on in the world of corrupt arms transactions. Such partiality leaves donors open to accusations of hypocrisy and discrimination, thus undermining the supposed solidity and consistency of their good governance, anti-corruption and security-sector reform programmes.
The Challenge of Measuring Military Expenditures and Corruption in SSA
The IMF Working Paper produced by Gupta et al. (2000) relies on the elegant algorithms of econometric analysis that seek observable patterns in quantitative data in order to reveal significant statistical correlations. The models are built upon probabilistic assumptions, e.g. when x occurs, y will follow. Gupta et al. hypothesised that corruption is correlated with high shares of military expenditure in both GDP and overall government expenditure, as well as with high levels of military procurement spending in relation to both GDP and total government spending. To be able to test this hypothesis in the sub-Saharan African context, reliable statistical data on military expenditures and arms procurement in SSA needed to exist, but as Hartley (2007) revealed, statistics on defence expenditure and arms procurement in sub-Saharan Africa are weak and, in some cases, non-existent. Datasets on military expenditures in SSA, while being available from a number of sources including the Stockholm International Peace Research Institute (SIPRI), the Congressional Research Service (CRS) and the United Nations Office of Disarmament Affairs (UNODA), are often incomplete, rarely correspond with each other and, as the collators of the data admit, are often unreliable, as transparency and accountability in military budgeting in SSA are notoriously poor.
Currently, the most reliable and consistent time series data on military expenditures in SSA is supplied by SIPRI, whose data suggest that formal military expenditures and arms procurement levels in SSA are well below the international average. In 2006, total military expenditure for sub-Saharan Africa amounted to just under US$9 billion, or some 0.8 per cent of global military spending (SIPRI military expenditure database 2007). The average military burden – military expenditure measured as a percentage of GDP – for the 30 SSA countries for which SIPRI had data in 2005 was only 1.5 per cent, less than half the average military burden during the height of the Cold War, when SSA military expenditure averaged between 4–5 per cent of GDP. This implies that military expenditure in the region is relatively low. However, reference to regional averages masks the wide variation in country-level military expenditures across the continent. For example, between 1998 and 2004, Gambia averaged a very low rate of military expenditure at 0.6 per cent of GDP, while Eritrea, engaged in a border war with Ethiopia, expended an average of 30 per cent of GDP during this same period. Moreover, there is a marked disparity in absolute levels of military spending. South Africa, for example, spent only 1.5 per cent of its GDP on defence in 2005, but with a budget of US$3.6 billion accounted for over one-third of total military expenditure in sub-Saharan Africa. Compare South Africa with Mali, with a budget of only US$33.6 million, but which spent 2.3 per cent of GDP on military expenditure, and the scale of disparity becomes apparent. This lack of correspondence draws attention to the wide differences on the continent, and cautions against making over-hasty assumptions about cross-country comparisons or correlations between high military expenditures and other variables.
Above all, there is a problem with the reliability of existing country-specific data on military expenditures. Omitoogun and Hutchful (2006, p. 2) conducted a series of case studies on military budgets in SSA and noted that ‘data on military expenditure … were very weak and needed improvement’. Most of their sample countries ‘have been known to engage in collusion to hide the cost of military activities from the general public and donors of economic assistance … who make aid conditional on low military budgets’ (Omitoogun and Hutchful 2006, p. 242). By way of illustration, it would be expected that African states involved in conflict, or having recently emerged from conflict, would record higher levels of military expenditure as a proportion of GDP than those countries not at war. While this assumption certainly holds for the majority of conflict states, as the figures in Table 1 illustrate, certain conflict-bound states, including Chad, DRC, Ethiopia, Nigeria, Sierra Leone and Sudan, record official levels of military expenditure well below 2 per cent of GDP. If we change tack and examine the Corruption Perception Index ranking for SSA states that is produced by Transparency International (Table 2), it is apparent that these same states have a very poor record on corruption, all being listed as among the most corrupt states in the world.
| Country | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 |
|---|---|---|---|---|---|---|---|---|
| Angola | (5.2) | (9.9) | (2.21) | (1.4) | (1.8) | (2.2) | (4.0) | (5.7) |
| Burundi | 6.6 | 6.3 | 6.0 | 8.0 | 7.2 | 7.3 | 6.6 | 6.2 |
| CAR | 14.8 | 16.7 | 15.6 | 15.4 | ||||
| Chad | 1.2 | 1.7 | 1.9 | 1.8 | 1.7 | 1.5 | 1.1 | 1.0 |
| Congo Republic | – | – | – | 1.4 | 1.7 | 1.9 | 1.7 | 1.4 |
| DRC | 1.2 | 1.7 | 1.9 | 1.8 | 1.7 | 1.5 | 1.1 | 1.0 |
| Djibouti | 4.4 | 4.2 | 4.0 | 3.9 | 4.2 | – | – | – |
| Eritrea | 35.3 | 37.4 | 36.3 | 24.7 | 23.7. | 24.1 | – | – |
| Ethiopia | 6.7 | 10.7 | 9.6 | 5.0 | 3.9 | 2.9 | 2.8 | 2.6 |
| Nigeria | 0.9 | 1.4 | 0.8 | 1.3 | 1.9 | 1.1 | 1.8 | 0.8 |
| Rwanda | 4.4 | 4.2 | 3.4 | 3.3 | 2.9 | 2.5 | 2.3 | 2.9 |
| Sierra Leone | – | – | 4.1 | 2.4 | 1.7 | 1.8 | 1.2 | 1.0 |
| Sudan | 2.4 | 4.1 | 4.8 | 2.9 | 3.2 | 2.3 | – | – |
| Note: there are no available figures for Somalia or Côte d'Ivoire, and the figures for Angola should be seen in the context of highly uncertain economic statistics, due to the impact of war on the Angolan economy. | ||||||||
| Source: SIPRI Military Expenditure Database 2007. |
| Country | Global ranking in corruption | Country | Global ranking in corruption |
|---|---|---|---|
| Botswana | 31 | Guyana | 123 |
| South Africa | 43 | Mauritania | 123 |
| Cape Verde | 49 | Niger | 123 |
| Mauritius | 53 | Zambia | 123 |
| Namibia | 57 | Burundi | 131 |
| Seychelles | 57 | Cameroon | 138 |
| Ghana | 69 | Ethiopia | 138 |
| Senegal | 71 | Gambia | 143 |
| Gabon | 84 | Togo | 143 |
| Lesotho | 84 | Guinea-Bissau | 147 |
| Swaziland | 84 | Nigeria | 147 |
| Madagascar | 94 | Congo Republic | 150 |
| Tanzania | 94 | Côte d'Ivoire | 150 |
| Burkina Faso | 105 | Kenya | 150 |
| Djibouti | 105 | Liberia | 150 |
| Eritrea | 111 | Sierra Leone | 150 |
| Mozambique | 111 | Zimbabwe | 150 |
| Rwanda | 111 | CAR | 162 |
| Uganda | 111 | DRC | 168 |
| Benin | 118 | Equatorial Guinea | 168 |
| Malawi | 118 | Chad | 172 |
| Mali | 118 | Sudan | 172 |
| São Tomé and Principe | 118 | Somalia | 179 |
| Comoros | 123 | ||
| Source: Transparency International Corruption Perceptions Index (CPI) 2007 | |||
| Available from: http://www.transparency.org/policy_research/surveys_indices/cpi |
The military burdens of those SSA countries listed by Transparency International (TI) as the least corrupt are recorded in Table 3. Despite lower levels of corruption than most SSA states, Botswana, Namibia and Lesotho have relatively high military burdens. Indeed, they appear to have spent a higher proportion of their GDP on defence than conflict-prone states such as the DRC, Chad, Congo and Nigeria listed in Table 1. How can this phenomenon be explained? The fact that less corrupt countries have a higher military burden may be attributable to the fact that the governments of these countries are committed to greater transparency and accountability in their military budgets than the afore-mentioned fragile states. If this is indeed the case, the whole notion of using the military burden as a benchmark to judge the ‘excessiveness’ of military expenditures is called into question, as is the supposed correlation between military expenditures and corruption.
| Country | Military expenditure (US\) millions) 2005 | Average military expenditure/GDP 1998–2005 | CPI score | CPI global rank |
|---|---|---|---|---|
| Botswana | 313.0 | 3.5 | 5.4 | 31 |
| South Africa | 3,568.0 | 1.4 | 5.1 | 43 |
| Mauritius | 12.3 | 0.2 | 4.0 | 53 |
| Namibia | 187.0 | 2.9 | 4.5. | 57 |
| Ghana | 80.0 | 0.75 | 3.7 | 69 |
| Senegal | 124.1 | 1.4 | 3.6 | 71 |
| Gabon1 | 110.0 | 1.8 | 3.3 | 84 |
| Lesotho | 33.6 | 2.9 | 3.3 | 84 |
| Swaziland | (48.8) | 1.7 | 3.3 | 84 |
| Madagascar | 54.0 | 1.2 | 3.2 | 94 |
| Tanzania | 135.0 | 1.5 | 3.2 | 94 |
| Burkina Faso | 76.2 | 1.3 | 2.9 | 105 |
| Note: Military expenditure figures for Gabon are for the years 2000–2005. | ||||
| Source: SIPRI Military Expenditure Database 2007 and Transparency International's Corruption Perception Index 2007. |
Data on the share of defence spending in government expenditure are even less readily available. World Military Expenditures and Arms Transfers (WMEAT), produced by the US Department of State, provides the only reliable source of time series data on the defence share of government expenditures in SSA. However, collection of these data ended in 2002, and the latest available set are for the year 2000. The WMEAT data reveal some dramatic differences between SSA nations, as Table 4 shows. For 1999, the median share was some 8 per cent, with the highest shares in Eritrea (51.1 per cent) and Sudan (46.8 per cent), and the lowest shares for Cape Verde (2.2 per cent) and Mauritius (0.9 per cent).
| Country | 1990 | 1999 | Country | 1990 | 1999 |
|---|---|---|---|---|---|
| Angola | 39.8 | 41.1 | Kenya | 9.8 | 7.1 |
| Benin | (19.4) | 8.3 | Lesotho | 17.1 | 6.5 |
| Botswana | 10.8 | 9.8 | Liberia | NA | 8.3 |
| Burkina Faso | 17.5 | 5.9 | Madagascar | 6.9 | 7.4 |
| Burundi | 12.7 | 26.7 | Malawi | 4.8 | 2.2 |
| Cameroon | 8.1 | 10.6 | Mali | (8.6) | 8.7 |
| Cape Verde | (2.8) | 2.2 | Mauritania | 12.3 | 18.9 |
| CAR | (6.6) | 15.4 | Mauritius | 1.5 | 0.9 |
| Chad | 16.5 | 12.7 | Mozambique | NA | 9.1 |
| DRC | (16.1) | NA | Namibia | 5.9 | 7.2 |
| Republic of Congo | 11.1 | 8.4 | Niger | (8.4) | 6.4 |
| Dijibouti | 20.1 | 12.7 | Nigeria | 7.6 | 8.1 |
| Equatorial Guinea | NA | 16.5 | Rwanda | 19.8 | 22.7 |
| Eritrea | (34.6) | (51.1) | Senegal | (6.3) | 8.2 |
| Ethiopia | 39.8 | 29.1 | Sierra Leone | 20.8 | 13.5 |
| Gabon | 13.7 | 7.3 | Somalia | NA | NA |
| Gambia | 5.1 | 5.4 | South Africa | 12.6 | 5.0 |
| Ghana | 3.4 | 3.1 | Sudan | (61.5) | 46.8 |
| Guinea | 5.0 | 7.4 | Swaziland | 6.6 | 4.6 |
| Guinea-Bissau | (4.0) | 6.1 | Tanzania | 8.7 | 10.1 |
| Côte d'Ivoire | (3.9) | 3.4 | Togo | 14.0 | 9.4 |
| Uganda | 25.9 | 13.9 | |||
| Source: WMEAT (2002). | |||||
| Note: NA = not available: figures in brackets are for nearest year to 1990 (e.g. 1989 or 1991). |
The weakness and unreliability of existing data on military expenditure in SSA suggest that the quantitative approach adopted by DFID, and Gupta et al. have limited utility in the SSA context. If the Gupta hypothesis of the relationship between military expenditures and corruption is accepted, it would have to be assumed, on the basis of existing statistical data, that corruption in military affairs in SSA was on the decline. However, the qualitative studies commissioned by SIPRI on the military budget process in selected SSA countries suggest that this is far from the case (Omitoogun 2003, Omitoogun and Hutchful 2006). These studies strongly suggest that corruption in the security sector is increasing, and that this trend appears to be proportional to the amount of military expenditure which has gone ‘off-budget’.
Donors and Defence Budgets in SSA
During the 1990s, multilateral and bilateral donors attempted to control ‘excessive’ levels of military expenditure in aid-dependent countries, using a ‘benchmark’ of 2 per cent of GDP. According to Omitoogun and Hutchful (2006), this had the unintended consequence of increasing secrecy surrounding military budgets in many SSA countries. One of the reasons for this was that donors had failed to take into account the legitimate security needs of recipient countries. The net effect was that an increasing amount of military spending was pushed ‘off budget’, thus reducing the reliability of military data upon which donor judgements are based.
The case of Uganda is illustrative of the inability of the state to provide basic security under donor terms of conditionality, which forced it to fund military campaigns with off-budget sources of income. In the 1990s, Museveni's Government, facing the costly task of attempting to contain the Lord's Resistance Army (LRA), was unable to realistically bring its military budget to below 2 per cent of GDP, given the manpower, logistical and arms expenditure needs required to conduct a campaign on its northern border. At the time, President Museveni's Government was dependent for more than 60 per cent of its expenditures on international aid, and was thus under considerable donor pressure to rein in military spending. In 1998–99 Museveni exceeded the 2 per cent benchmark. The donors, led by the IFIs, suspended aid to Uganda, and only resumed lending when the government returned military expenditure to the 2 per cent ‘acceptable level’. Faced with these intractable demands Museveni implemented several creative accounting techniques to enable him to allocate sufficient resources to his military campaign, while allowing him to keep official military expenditures below the 2 per cent benchmark. Resources earmarked for other government departments were diverted to the Ministry of Defence. In 2001 Museveni openly asked the donors to lift the 2 per cent ceiling, and requested permission to spend twice what the government had officially allocated to the military in 2000. In effect, the request was merely an attempt to gain permission to officially spend what was already being allocated to the military. Reluctantly, and in the face of international pressure to find some kind of solution to the human rights violations perpetuated by the LRA, the donors agreed. Since then, there has been a steady rise in official military expenditures. Under sustained military pressure from the Uganda People's Defence Force (UPDF), the LRA has to all intents and purposes been defeated. Peace negotiations are under way at the time of writing.
Where budgets have been kept within donor-defined levels of acceptability, military forces have suffered from chronic under-funding, which is reflected in low pay and allowances, inadequate training, poor living and working conditions, a lack of medical services and an absence of basic equipment (Henke and Rupiya 2001, Omitoogun 2003). In certain circumstances, this state of affairs has proved destabilising on two counts:
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resources are insufficient to sustain effective military capabilities, which limits the capacity of the state to provide basic security; and
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low pay and poor working conditions can lead to severe grievances and even mutiny amongst military personnel which, in extreme cases, can result in full-scale military coups, as in the case of Côte d'Ivoire in 2002.
First, there is a general lack of qualified accountants. The systematic downsizing of the civil service, and reductions in public sector pay under the terms of IMF-imposed structural adjustment programmes during the 1980s and 1990s, resulted in a widespread exodus of skilled professionals from public sector employment across Africa, which meant there was an acute shortage of personnel able to audit and reconcile accounts. The outcome has been that, all too often, unqualified personnel perform budget preparation and the reconciliation of accounts. Unless efforts are made to recruit and pay accountants a decent salary, sound financial management of government accounts, including defence budgets, will remain unattainable.
Second, there is a need to introduce integrated defence planning systems. The majority of African states lack the capacity and skills to design and implement defence planning procedures and military budgeting processes. As a consequence, military budgeting is extremely ad hoc and inefficient, often rendering security forces bereft of even the most basic of equipment, such as uniforms and boots, let alone any military equipment.
Finally, the necessary legal and institutional mechanisms that ensure and enforce accountability tend to be weak in almost all SSA countries. Oversight of the military budget is plagued by weak control by the ministry of defence, a lack of coherent defence policy, weak parliamentary control and limited involvement of civil society. Even where institutional arrangements for accountability and public scrutiny exist, they are often bypassed under the rubric of national security (Adekanye 1999, Omitoogun and Hutchful 2006). The general absence of transparency and accountability mechanisms in the defence budgetary process allows for the systematic manipulation of military data by corrupt officials. The manipulation of military accounts, and the secrecy that surrounds this, have arisen to hide graft and the mismanagement of resources from public scrutiny, but also to deceive donors about the true cost of military activities.
‘Off-budget’ Military Funding and Corruption
As already noted, a significant proportion of arms procurement transactions in SSA occur ‘off budget’. The secret and shadowy nature of ‘off-budget’ funding creates ample opportunity for malfeasance. A variety of highly innovative off-budget mechanisms that enable the funding of procurement and other military ‘excesses’ have evolved in Africa.
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Asset transfers: The redistribution of existing assets to the benefit of the armed forces that may involve the reallocation of resources from other budgetary headings or state revenues. Examples include the Ugandan Government's initial allocation of resources to the police budget, later redirected to the military, to augment the costs of the campaign against the Lord's Resistance Army in the North of Uganda (Omitoogun 2003). During the border war between Eritrea and Ethiopia (1998–2000), Ethiopia diverted the proceeds of the privatisation of state companies to fund its war effort, in particular the US$300 million purchase of Sukhoi Su-27s from the Russians (Africa Confidential 1999).
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Natural resource predation: The pillage of natural resources such as diamonds, copper, coltan, oil and timber, and the use of revenues for arms procurement and the personal gain of warlords and generals alike, is well documented in the DRC, Liberia, Sierra Leone and Angola (Renton et al. 2007, Global Witness various, UN Security Council 2003). In Nigeria, the notoriously corrupt cash-call system that operated in the state-owned oil industry is thought to have funded Nigeria's role in the ECOMOG operations in Liberia and Sierra Leone between1990 and 1999. The figures for these ‘peace’ operations did not appear in Nigeria's defence accounts, but are thought to have cost an estimated US$12 billion (Adekanye 1999). In Angola, it has been estimated that as much as US$1 billion a year of state oil revenues have been siphoned off into shell companies for use in a tangled web of corruption and backroom arms deals (Global Witness 2004). In the DRC, a total of US$80 million was appropriated from the state-owned diamond mining company (MIBA), of which US$20 million is thought to have been used to buy weapons from Ukrainian and Czech arms suppliers (Africa Confidential 2004).
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Taxes and levies: Soldiers and rebel groups often augment their wages and raise money for weapons through the imposition of informal taxes and levies, and other illegal activities. Warlords in Somalia organised ‘tax zones’ to raise resources to prosecute their clan wars. In Burundi, soldiers augment their wages by imposing taxes on farmers' crops and levies on border trade (Nimubona and Sebudadi 2007). Soldiers employ road blocks all over Africa to extract payments to embellish their paltry wages.
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Shadow trade: In the Niger Delta, officers in the Joint Task Force are reportedly involved in the criminal gangs that are engaged in the illegal bunkering of oil (Africa Confidential 2007). Some 30,000–100,000 barrels of oil are stolen each day; the revenue from oil is thought to buy arms for the militias (Africa Confidential 2006). West Africa has become a major exporter of cocaine. It is not produced in the region, but the networks linking Colombian and Venezuelan drug barons with their West African business partners, which include senior military officers and government officials, have established complex and lucrative transshipment operations along the West African seaboard. The president and senior military officers in Guinea-Bissau are thought to be at the centre of the cocaine trade in West Africa (Africa Confidential 2007).
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The diversion of humanitarian assistance and aid: Humanitarian relief for the victims of armed conflict in SSA opened up opportunities for new income streams for both the military and rebel groups. In Liberia, the widespread diversion of relief supplies and assets was believed to have significantly assisted those involved in the fighting (Atkinson and Leader 2000, Savage 2007). In southern Sudan, the fraudulent ‘redeeming’ or buying-back of slaves, a campaign that raised millions of dollars in charity in the US and other developed countries, enabled the Sudan People's Liberation Army to use the diverted funds to buy arms and ammunition (Harker 2000). Ethiopia is thought to have diverted humanitarian aid to procure weapons in the build-up to its border war with Eritrea (Cooper & Kyzer 2003).
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External military assistance: After years of ignoring Africa, the US has dramatically increased military assistance to the region. The total amount of US military sales to, and financing and training expenditures for, eight African countries considered strategic partners in the ‘war on terror’ has increased from about US$40 million over the five-year period 1997–2001, to over US$130 million between 2002–2006 (LeMelle 2008). Under the Trans-Saharan Counter-Terrorism Initiative (TSCTI), the Pentagon supplied US$500 million to increase border security and counter-terrorism capacities in Mali, Chad, Niger and Mauritania. The African Contingency Operations Training and Assistance programme (ACOTA) has provided small arms and training for peacekeeping operations to Benin, Botswana, Côte d'Ivoire, Ethiopia, Gabon, Ghana, Kenya, Malawi, Mozambique, Nigeria, Senegal, South Africa, Uganda and Zambia. Another source of external support is derived from neighbouring African states. They may supply arms or other forms of military assistance to rebel groups, or state forces, involved in conflict. For example, in the civil war in the Republic of Congo 1993–2002, Angola and Chad provided military assistance to President Sassou-Nguesso. In the DRC, Laurent Kabila received military assistance in the form of arms, training and supplies from neighbouring states, including Zimbabwe, Angola, Namibia and, in the early days of the war, Rwanda and Uganda.
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Diaspora contributions: Funds raised from diasporas are another means of augmenting ‘off-budgetary’ resources. Eritrea was reported to have raised US$400 million for its war effort in the form of donations from the Eritrean diaspora (The Economist 1999). These funds are thought to have been used to purchase MiG-29s from the Ukrainians.
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Peacekeeping: Volunteering soldiers for UN or African Union peacekeeping operations (PKOs) is another means of generating extra funds. Ethiopia, Ghana, Nigeria, Kenya, Mozambique, Namibia, Senegal, South Africa, Uganda and Zimbabwe are among those countries that have volunteered for PKOs. Rarely do UN payments for these forces appear in annual military budgets. The failure to declare payments offers opportunities for malfeasance. In certain cases, corrupt military officers have banked soldiers' pay (Hutchful 2003). During Nigeria's involvement in ECOMOG missions in West Africa, generals benefited from revenues written off as expenses (Adebayo 2002). Millions of dollars were diverted into private bank accounts as part of this ruse.
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Prolonged conflict: Many conflicts in Africa are purposely prolonged by the military and rebel groups, because the conditions of instability enable warlords and generals to rob their nations of resources and funds. Plundered resources provide the income with which militias and the armed forces are able to purchase arms so that they can continue to prosecute war.
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The diversity and opacity of these resources makes it almost impossible to monitor off-budgetary procurement trends. Subsequently, little is known about the nature of the arms being procured, how much is being spent, the scale of bribes and kickbacks involved, or where and how the ill-gotten gains from corrupt practices in this form of procurement are laundered.
Arms Procurement and Opportunities for Corruption
Even in the context of ‘best practice’ in defence procurement, i.e. with proper systems of public accountability and transparency in decision making and auditing, the large and technically complex nature of defence contracts makes it hard for civilian authorities to fully comprehend and assess whether or not a contract is necessary, appropriate or indeed ‘value for money’. Challenging equipment specifications is a highly technical process and one that requires a combination of strategic, engineering and accounting expertise. In South Africa, where most of these skills exist and parliamentary oversight mechanisms and auditing procedures have acquired a considerable degree of sophistication, the size and complexity of the recent ‘Strategic Procurement Package’ created an ideal environment for corruption to flourish.
In the 1995 Defence White Paper, the South African Ministry of Defence highlighted the need to re-equip the South Africa National Defence Force (SANDF) to meet the national security needs of the new democracy. This resulted in the Strategic Arms Procurement Package, which was signed off in December 1999, costing the South African taxpayer US$4.8 billion. The South African Government claimed that the package would pay for itself in the long run, through counter-trade and offset agreements. There was a huge public outcry about this allocation of scarce public expenditure resources at a time when the Reconstruction and Development Programme, designed to lift poor black people out of poverty, had been abandoned.
Controversy associated with the ‘Arms Deal’, as it has become known, spread, as irregularities in the tendering process and general lack of transparency came to light. Several high level investigations have been conducted into accusations of corruption involving bribe-takers – African Defence Systems (ADS) and senior figures within the ANC, including former Defence Minister Joe Modise, Tony Yengeni, ANC Chief Whip and former chairman of the Parliamentary Defence Committee, and brothers Shamin and Shabir Sheik, who have links to senior ANC officials. Bribe-payers, notably BAE Systems, the European Aeronautic Defence and Space Company (EADS) and Thales/Thompson, have also been implicated. Despite substantial evidence of widespread corruption in the deal, the major players have not been prosecuted to date, and the various phases of the US$4 billion arms deal continue unabated.
The sheer size of ‘Arms Deal’, the South African Department of Defence's ill-preparedness to manage the simultaneous acquisitions, SANDF's questionable ability to absorb the state-of-the-art equipment, the choice of expensive, offensive weapon platforms such as the new Gripen JAS 39 fighter aircraft, at a time when the southern African regional security environment has achieved relative stability, all point to a government agenda quite divorced from its stated objective of re-equipping the country's navy and air force.
Given the resource constraints of most African buyers, including South Africa, a number of non-currency methods of payment for arms procurement have evolved, including counter-trade and offsets. Trading prospects are enhanced, both for suppliers and recipients, as trade is facilitated through a cashless, mutual exchange of needs. Offsets are industrial or commercial compensation practices required as a condition of purchase of defence articles and/or services. They include co-production arrangements, licensed production, sub-contractor production and overseas investment or technology transfer. As offset arrangements tend to favour countries that have attained a degree of industrialisation, few arms deals involving sub-Saharan countries involve offset agreements. South Africa is an exception to this rule.
Offset agreements are outlawed in all other forms of government procurement by Article XVI of the WTO plurilateral Agreement on Government Procurement, but are often the decider in defence deals because of their anticipated economic benefits. However, as Dunne and Haines (2006, p. 43) have shown in the South African case, offset deals often have questionable economic benefits. The prices of the new weapons systems appear to have been inflated by the offset arrangement. Hidden costs include unanticipated capital expenditure on imported equipment, which has had a detrimental effect on the balance of payments; an increase in state expenditure on R&D in order to realise technology transfers; and the downward revision of anticipated job creation. Overall, the economic benefits to the South African economy remain unclear and there may even be considerable opportunity costs in the long run. Finally, in the non-competitive and non-transparent arrangements that surrounded South Africa's offset arrangements, the potential for corruption was extensive.
Counter-trade is far more common in arms transactions in SSA. This type of transaction takes various forms, including barter and counter-purchase arrangements. Barter refers to the direct exchange of goods-for-goods where no cash is involved. Although barter is as old as trade itself, contemporary barter deals are more common than is often realised. State-to-state transactions between African governments often involve barter. For example, Zimbabwe Defence Industries supplied the DRC armed forces with light weapons in exchange for mineral concessions. Angola was also thought to benefit from mineral concessions extended by President Laurent Kabila in exchange for military assistance. Counter-purchase, on the other hand, is a form of exchange that commits the arms seller to purchase a compensatory amount of commodities. In the context of developing countries this normally involves primary commodities. The arms contractor can either market these counter-purchased goods themselves or employ a specialist commodity broker to do the job for them. On the whole, defence firms try to avoid counter-purchases because they inevitably incur extra transaction costs.
Offsets and counter-trade are notoriously difficult to monitor and audit, because the deals are complex, multi-layered, take a long time to negotiate and are subject to fluctuating currency rates and/or commodity prices. This ambivalence provides ample opportunity to inflate deals with bogus expense claims, ‘bonuses’, ‘incentives’ and commissions.
The Bribe-makers
The main focus of DFID's concern with corruption in military expenditures and arms procurement is on the demand side of corruption dynamics, namely, on the corrupt role of political and military elites in SSA. But for bribe-takers to exist there have to be bribe-makers. Transparency International (2007) has noted that the arms market is one of the most corrupt sectors in the world. Despite accounting for less than 1 per cent of total world trade, the arms trade accounts for around 50 per cent of all corrupt transactions, according to a report issued by the US Government (US Department of Commerce 2000, p. 11). A 2006 survey revealed that approximately one-third of all defence companies claimed that they had lost defence contracts because competitors had offered bribes to secure sales (Control Risks 2006).
The payment of large ‘commissions’ by arms companies to individual officials in defence procurement deals can provide an incentive for the recipient to increase the technical specification of the weapons and even to persuade governments of the need to purchase entire systems, often entirely unnecessarily. The helicopter scandal in Uganda is a case in point. In 1998 the Ugandan Government purchased four second-hand Mi-24 helicopters from the Republic of Belarus at an inflated price of US$12.3 million (Ochieng 1998). The helicopters were not airworthy. Reportedly, Museveni's brother, Major General Salim Saleh, received an US$800,000 ‘incentive’ to seal the deal. In 1998, the South African Government's last-minute decision to switch from the Italian Aermacchi MB-339 trainer aircraft, the preferred option of the South African Air Force, to the more expensive BAE Systems-built Hawk 100 trainer, is thought to have occurred as a result of substantial sweeteners offered by BAE Systems to the late Joe Modise, then Minister of Defence, and his aide Fana Hlongwane (Roeber 2004, p. 61, Groenink 2007).
The sums involved in bribes are often life-changing for the individuals involved. Payments come in a number of forms, and are made through a variety of channels such as the brown envelope or the Swiss bank account, and take the form of luxury commodities such as cars, villas, private jets and access to private clubs. The scale of ‘commissions’ and bribes is unknown, and varies from sale to sale. A conservative estimate made by TI UK has put it at 10 per cent of a contract's value (TI UK 2002). However, findings by the UK Special Fraud Office inquiry into the 2006 Tanzania arms scandal found that commissions of 29 per cent were paid, and suggests that bribes may be significantly higher than TI's estimates (Leigh 2006, McGreal 2007). Estimating the total cost of corruption in the arms trade is fraught with challenges, but extrapolating from World Bank figures on global rates of corruption, Transparency International's defence team has conservatively estimated that corruption within the global defence sector averages around US$20 billion per annum (TI UK 2002).
The firms and the government officials who facilitate arms sales often refer to bribes as ‘commissions’ or ‘incentives’. European arms manufacturers in stiff competition with each other, and with US defence giants, like to think that their commissions and ‘incentive packages’ create a ‘level playing field’ in a highly competitive defence market. Before the OECD Anti-Bribery Convention was introduced in 1997, these incentives were seen as legitimate practice in defence sales, notably when the payments were made abroad. Since the introduction of the OECD Convention, it is illegal for corporations from OECD countries to offer bribes to foreign officials; however, evidence from recent investigations into arms scandals suggest that the paying of bribes to secure arms sales continues to be widely practised outside the OECD region.
The Bribery Payers Index 2006 (BPI) produced by Transparency International found that Northern companies tend to offer more bribes in Africa than in any other region of the world (TI 2006, p. 8). Of this trend, TI has observed that:
It would seem that many foreign companies do not resort to bribery while operating in the ‘developed’ world, where institutions are strong and there is a significant threat of legal retribution for illegal activities. However, in less developed countries (many of which are characterised by poor governance and ineffective legal systems for dealing with corruption), it appears that many companies continue to engage in corrupt practices. The result is that the countries least equipped to deal with corruption are hardest hit, as their anti-corruption initiatives are undermined. (TI 2006, p. 10)
The arms industry is ‘hard-wired for corruption’, mainly because of both the special treatment it receives from governments and the secrecy that sanctions every aspect of its transactions. Arms companies from the rich West bribe the political and military elites of poor countries to purchase weapons they cannot afford, and often do not need. These sales are justified on the basis of the national economic, employment and security interests of rich Western states, but there is a high cost to such deals, which contribute to the burden of national debt in poor countries, divert scarce national resources from social spending, and often contribute to the undermining of the security of nations through the purchase of expensive and inappropriate equipment.
The Role of the International Financial Institutions
Every single corrupt arms deal involves a financial pipeline that enables bribery to take place. It is not just the corrupt African elites, or the arms companies and their agents, that are prepared to pay bribes and mask their shadowy deals. There are other less visible players – including banks, offshore shell companies, accountants and lawyers – who facilitate the funding of arms deals and help to launder ill-gotten gains.
In laundering money, large amounts of cash are usually spread among many different accounts – such as in free-trade zones, financial offshore centres, and tax havens – where they are converted into financial instruments such as money orders, bonds, investments in trusts or charities, or into shell companies. The money is then transferred to other locations, sometimes in the form of payments for bogus ‘goods and services’ issued by holding companies owned by lawyers or accountants on behalf of unnamed beneficiaries. The funds are then wired back to their originators as part of the earnings of a legitimate business. It is a relatively simple process that leaves either no paper trail, or one that is so complicated that it is difficult to trace. Because the objective of money laundering is to return the illegal funds in a legal form to the individual who generated them, launderers prefer to move funds through stable financial systems – hence the central role of banks in the money laundering process.
A few examples reveal how global and widespread the money laundering of illegal arms receipts is. In 2006, Africa Confidential reported that Kenyan banks had been involved in the laundering of the ill-gotten gains of Nigeria's military and political elites in the late 1990s (Africa Confidential 2005). Extensive investigations into the ‘Angolagate’ scandal, involving illicit arms transfers to Angola worth US$790 billion orchestrated by key members of the French political elite, have revealed that a number of Portuguese banks were involved in transferring illegal commissions. In total, some 70 transfers took place, totalling US$54 billion. Fifty of these transfers, to a total value of US$21 million, were deposited in Portuguese banks. The largest transfers were to the state-run Caixa Geral de Depositos (CDG) and the Banco Comercial Português (BCP), the country's two largest banks. The Nacional de Crédito, Nacional Ultramarino, Comercio e Industria, Totta and Açores, Pinto and Sotto Mayor banks, and the Portuguese branches of Spain's Banco Bilbao and Britain's Barclays, are also on the list of institutions contained in the indictment (Inter Press Service 27 January 2009).
Until relatively recently, the bribes or incentives involved in arms deals were not considered illegal, and banks readily complied with their clients' need to launder their ill-gotten gains. Since 9/11, anti-money-laundering legislation and practice have been tightened up. More than 150 countries promised to cooperate with the US in its fight against the financing of terrorism, 81 of which (including the Bahamas, Argentina, Kuwait, Indonesia, Pakistan, Switzerland and the EU) actually froze assets of suspicious individuals, suspect charities and dubious firms, or passed new anti- money-laundering laws and stricter regulations (the Philippines, the UK, Germany). Nevertheless, 19 ‘black holes’, or poorly regulated financial services and offshore banking facilities, still persist in Russia, Indonesia and Israel, to name the most prominent.
Money launderers are resilient. They adapt fast to changing circumstances. Alternative banking systems are being established beyond the bounds of the West's financial regulation and jurisdiction. Defunct banks in territories with corrupt politicians, lax regulation and porous tax regimes are being purchased. The cash-hungry countries of Montenegro, Serbia, Macedonia, Ukraine, Belarus and Albania are proving willing participants.
Hypocrisy and Discrimination
In December 2006, in response to political pressure from the highest levels in the British Government, the Director of the Serious Fraud Office announced his decision to terminate the investigation into accusations of BAE corruption in the al-Yamamah deal. By failing to conduct full investigations into arms trade scandals, the British Government exposed itself to accusations of hypocrisy and discrimination. It was a major setback in the campaign to control corruption in the transnational arms industry.
In July 2007, Jacob Zuma, himself implicated in corrupt arms dealing in South Africa, accused the British Government of double standards, and posed a pertinent question to the Newsnight investigator Peter Marshall: ‘Why should the rulers (of the West) be allowed to pick and choose on matters that relate to the application of law?’ (Newsnight 28 May 2007). Whatever his own culpability, Jacob Zuma has a point. DFID and other donors are hardly in a position to impose yet more levels of pernicious conditionality on development aid when their own governments are implicated in diverting scarce resources towards expensive and corrupt arms deals and in repressing enquiries into corruption. This state of affairs not only makes a mockery of DFID's good-governance and anti-corruption programmes, but also undermines its security-sector reform agenda, which is a critical component of its post-conflict work.
If the British Government hoped that UK involvement in arms scandals could be covered up and would quietly disappear, they have had a nasty shock, as the US Department of Justice has decided to prosecute BAE Systems for its prominent role in corruption in the global arms trade. The US appears to be the only country currently willing to impose the ethical and legal principles governing the arms trade and embodied within international law. Cynics may argue that they are motivated by their own national interests in preserving the dominance of US arms companies within the international arms market. While there may be some truth to this accusation, if the US Department of Justice can help to regulate the ruthless and corrupt transnational arms industry, whatever its motivation, this may open up opportunities for challenging corruption in the military sector in SSA.
Conclusion
DFID's cautious attempt to tackle corruption in arms procurement through its TIDE programme has been put on the back burner. Not only did the neoliberal methodologies employed to analyse the problem prove inadequate to the task in the SSA context, but it became increasingly apparent to DFID officials that British companies and, by implication, the British Government which had sanctioned and supported British defence companies' sales abroad, were heavily implicated in arms procurement scandals. Given DFID's past record of attempting to control excessive military expenditures, and its more recent attempts to improve transparency and accountability in defence budgeting, it appears to be hopelessly out of touch with the reality of Africa's military and security environment. It should therefore come as little surprise that its endeavour to design an anti-corruption policy for arms procurement and expenditures in SSA has failed to take off.
Corruption in the arms trade is a phenomenon that can only be controlled when it is identified as a ‘global governance’ problem, one in which the rule of law and, in particular, anti-corruption legislation, has to apply to all parties engaged in corruption. These actors include Western politicians who promote arms sales, civil servants who oversee the licensing of arms exports, export credit guarantee services, arms company salesmen and executives, ‘independent agents’, political and military elites in recipient countries and the offshore banks who launder the ill-gotten gains. Only then can the global pipeline of covert deals, bribery, kickbacks, money laundering and secrecy be overturned, and ethical and legal principles upheld.
As a first step in regaining moral authority, Western governments need to adhere to, and actively enforce, the 1997 OECD Anti-Bribery Convention. This requires the provision of adequate resources to empower the OECD Anti-Corruption Committee to effectively investigate and prosecute those arms companies engaged in corruption in the developing world. A second step should be to impose conditions on export licences to ensure that companies comply with anti-corruption legislation and practice. Scrutiny of individual arms export licences should also be undertaken by government committees, to ensure both greater transparency in the licensing process, and increased company compliance with anti-corruption legislation. To complement these measures, arms companies should be made to adopt internal auditing systems capable of detecting corruption and the payment of bribes. Finally, government support for the domestic arms industry through the supply of export credit guarantees should be conditional upon anti-corruption compliance. Once the West has put its own house in order, it will be in a stronger position to start tackling the complex and challenging nature of security sector corruption in the developing world. To lead by the example of ‘best practice’ is a first and necessary step in the challenging task of dismantling the transnational web of corruption in arms procurement and the arms trade.